Employers are often unsure under what circumstances interns must be paid. An HR.BLR.com subscriber recently posted a question using our 'Ask the Expert' service about whether they needed to pay their interns. In this video, Legal Editor Joan Farrell answers this question, including a review of the 6-factor test that determines whether and employment relationship exists between the employer and the intern--and is therefore covered by the Fair Labor Standards Act (FLSA)--and outlines necessary elements of an unpaid internship.

Hi. I’m Joan Farrell, a Legal Editor at HR.BLR.com. We recently received an Ask the Expert question from one of our subscribers on interns and pay.

The subscriber asked "If we hire an intern, do we have to pay them? Are there any forms or documentation that an intern needs to fill out during the period of his or her work?"

Internships in the for-profit, private sector will most often be viewed as employment by the Department of Labor (DOL), unless specific requirements are met. Interns who qualify as employees rather than trainees, typically must be paid at least the minimum wage and overtime compensation for hours worked over 40 in a workweek. According to the DOL, if all of the following six factors are met, an employment relationship does not exist between an intern and the company that sponsors the participant.

1. The internship, even though it includes actual operation of the facilities of the employer, is similar to training that would be given in an educational environment;
2. The internship experience is for the benefit of the intern;
3. The intern does not displace regular employees, but works under close supervision of existing staff;
4. The employer that provides the training derives no immediate advantage from the activities of the intern, and on occasion its operations may actually be impeded;
5. The intern is not necessarily entitled to a job at the conclusion of the internship; and
6. The employer and the intern understand that the intern is not entitled to wages for the time spent in the internship.

If no employment relationship exists, the participants are not subject to the FLSA.

In general, the more an internship program is structured around a classroom or academic experience as opposed to the employer’s actual operations, the more likely the internship will be viewed as an extension of the individual’s educational experience (this often occurs where a college or university exercises oversight over the internship program and provides educational credit). The more the internship provides the individual with skills that can be used in multiple employment settings, as opposed to skills particular to one employer’s operation, the more likely the intern would be viewed as receiving training. Under these circumstances, the intern does not perform the routine work of the business on a regular and recurring basis, and the business is not dependent on the work of the intern.

On the other hand, if the interns are engaged in the operations of the employer or are performing productive work (for example, filing, performing other clerical work, or assisting customers), even though they may receive some benefits in the form of a new skill or improved work habits, an employment relationship may still exist because the employer also benefits from the interns’ work.

If an employer uses interns as substitutes for regular workers or to augment its existing workforce during specific periods, these interns must be paid at least the minimum wage and overtime. If the employer would have hired additional employees or required existing staff to work additional hours had the interns not performed the work, the interns will be viewed as employees. Conversely, if the employer is providing job shadowing opportunities that allow an intern to learn certain functions under the close and constant supervision of regular employees and the intern performs no or minimal work, the activity is more likely to be viewed as a bona fide educational experience.

If the intern receives the same level of supervision as the employer’s regular workforce, this would suggest an employment relationship, rather than training.

An unpaid internship should be of a fixed duration, established before the outset of the internship. Further, unpaid internships generally should not be used by the employer as a trial period for individuals seeking employment at the conclusion of the internship period. If an intern is placed with the employer for a trial period with the expectation that he or she will then be hired on a permanent basis, that individual generally would be considered an employee under the FLSA.

Employers can can help ensure compliance by drafting a written agreement between the company and the intern outlining the terms and conditions of the unpaid internship, including a definition of the job, stating it is unpaid and for the benefit of the intern, and that it is merely a learning experience for the intern.

Joan S. Farrell, J.D., is a Legal Editor for BLR’s human resources and employment law publications. Ms. Farrell has over 10 years’ combined experience in employment law and human resources management. As an in-house attorney for Citizens Communications Company, Ms. Farrell provided counseling on employment practices and represented the company in labor and employment matters. She later worked as a manager of Citizens’ Human Resources and Employment Law group. Ms. Farrell also represented management in employment law matters as an attorney with the national law firm of Brown Raysman Millstein Felder & Steiner LLP. Her experience includes representing management in administrative matters, discrimination and wrongful termination claims, as well as wage and hour disputes. Ms. Farrell received her law degree from Pace University School of Law.

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